Curacao is an island in the southern Caribbean Sea, off the Venezuelan coast. The Country of Curacao, which includes the main island plus the small, uninhabited island of Klein Curacao ("Little Curacao"), is a constituent country of the Kingdom of the Netherlands. Its capital is Willemstad.

Curacao is the largest and most populous of the three ABC islands (for Aruba, Bonaire, and Curacao) of the Lesser Antilles, specifically the Leeward Antilles. It has a land area of 444 square kilometres (171 square miles). As of 1 January 2009, it had a population of 141,766.

Prior to 10 October 2010, when the Antilles was dissolved, Curacao was administered as the Island Territory of Curacao, one of five island territories of the former Netherlands Antilles.

Holding structures are one of the oldest and best-known planning opportunities offered by the Antilles. Many international holding structures today feature an Antilles company as a parent or substantial shareholder, typically holding shares in an underlying Dutch BV company (the "Dutch Sandwich"), or a member of a Dutch Cooperative. The advantages of this structure have made the Antilles one of the most important jurisdictions for structuring the receipt of worldwide dividends.

The tax treaty between the Netherlands and its' overseas independent territories (the "BRK") provides Antilles companies access to the benefits available via the Netherlands' extensive tax treaty network. The typical 'Dutch Sandwich' structure consists of a Netherlands BV with an Antilles NV as parent company.

Under the amended BRK, which came into effect on January 1, 2002, dividends paid by a Dutch BV to any Antilles NV shareholder holding 25% or more of the paid-in share capital (or voting rights) in the Dutch BV, will be subject to Dutch dividend withholding tax at a rate of only 8.3%. This is significantly lower than the standard withholding tax rate of 25% otherwise applicable to dividends paid out to foreign shareholders. It is possible to reduce the tax burden of 8.3% to 0% by using a Dutch Cooperative instead of a Dutch BV. Because a Dutch Cooperative has no capital divided into shares, the Dutch Dividend Withholding Tax Act does not apply to dividends distributed by a Dutch Cooperative to the Antilles shareholder.

The Dutch BV and the Dutch Cooperative typically functions as an underlying holding company, can benefit from the Dutch Participation exemption, receiving dividends from subsidiaries subject to deduction (if any) of the minimal amounts of withholding tax applicable under relevant tax treaties or under the EU Parent-Subsidiary Directive.

The Antilles is not a low-tax jurisdiction. Antilles companies are usually subject to profit tax on their worldwide net income at a flat rate of 34.5% (including surcharges).

But an Antilles holding company can take advantage of a domestic tax concession (known as the 'participation exemption') under the New Fiscal Regime ("NFR"), which exempts that company from profit tax on dividends received from, and capital gains realized on the sale of shares in, qualifying subsidiaries.

The extent of the participation exemption varies depending on the location of the subsidiary: a full 100% exemption is available where the relevant subsidiary is either Dutch or Antillean; in all other cases, the rate will be 95%. The remaining 5% being subject to tax at the full rate of 34.5%, representing an overall effective tax rate of only 1.725% on total profits.

The participation exemption is applicable as of the first day the shares in a qualifying subsidiary are held.

In order to qualify for the participation exemption under the NFR, one of the following conditions should be met:

  • The Antilles' company should own at least 5% of the paid-in share capital, or voting rights or profit certificates of the subsidiary; or
  • The acquisition price of the participation should amount to at least ANG 1,000,000 (approximately USD 560,000).

There are no other requirements to be fulfilled.

No form of withholding tax exists in the Antilles, which means that all dividends declared and paid by an Antilles company are free from tax irrespective of the location of the recipient shareholders.

The NFR introduced a new tax ruling policy in 2002, which complies with the latest international standards regarding transparency and ring fencing. The new tax ruling provides new opportunities for holding company activities and is similar to the former policy in place in the Netherlands.

It is now possible to obtain a ruling that provides certainty as to whether or not an interest held by an Antillean company in a foreign subsidiary qualifies for the Antilles participation exemption. A ruling can also be obtained to ascertain the conditions under which an Antillean holding company is deemed to hold the interest in the foreign participation for its own account.

If an Antilles resident company fully or partially carries on its enterprise by means of a foreign permanent establishment, an advance tax ruling can be obtained to determine what proportion of the company's profits are considered foreign profit and thereby 95% exempt from Antilles profit tax.

Alongside the standard rulings, it will be possible to negotiate tailor-made rulings, which adds further advantages. All rulings are usually valid for a five-year period, with an option to renew for a further five-year period.

Our Antilles office was opened in May 1999.